USD: Within the severely hit commodity segment, CAD, AUD and NZD have been under increasing pressure late in the week after having been partly spared from the oil market swings earlier in the week. Contributing to the weakness may be a generally worsening in China-related sentiment. After the disappointing July PMIs, the news of the PBOC is considering an RRR cut seemed to endorse some re-rating of the recovery prospects. For now the greenback remains a bid across most of the majors.
CAD: The loonie has followed commodity currencies lower, but the release of the June payroll data in Canada may provide some support to the currency. After some grim readings – largely affected by the flare-up in cases in the country in spring – we expect a very solid reading today (consensus is looking at a 175k headline number), which should underpin the robust domestic recovery narrative in Canada, ultimately allowing the BoC to stay on track for more tapering this year.
EUR: No impact from the well-telegraphed change in ECB inflation targeting The ECB published the results of its strategy review yesterday, which were received without much emphasis from the market. The main highlight was the change in the inflation targeting from “below, but close to 2%” to a “symmetric 2% target” over the medium term. The EUR appears more driven by overall market themes which is limiting, and may continue to do so today, the downside for EUR/USD to the 1.1800 area.
GBP: The UK government announced that vaccinated people will no longer have to quarantine upon return to the UK from most countries, another indication that the recent increase in cases is not set to materially derail re-opening plans in the country - a notion which appears largely priced in by the market. Sterling has started the day on the back foot after May’s growth data came in below expectations (MoM growth slowed to 0.8% from 2.3% in April). Some cracks in the so-far very positive recovery story in the UK may leave sterling a bit more vulnerable, especially when adding recent indications of fresh political tensions between the UK and EU. In the UK calendar, keep an eye on BoE Governor Andrew Bailey’s comments today.
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